Social Credit Angles

A Social Credit Angle on Banking, Budgets and Financial Propaganda

 In 2009 the national debt was $101 000 000 000. By April this year it had blown out to $551 000 000 000 with an annual interest bill of about $16 000 000 000 to come out of taxation or more interest bearing finance. The interest alone works out to about $672 for every person in this country or $2500 for a family of four. And there seems no letup in sight. Australia’s debt ceiling is projected to climb to $600 000 000 000.

 The present government has painted themselves into this corner. When Labour was running the show the looming debt crisis was the Liberal line. After winning power the mantra was much the same except now the fiscally prudent Liberals were cleaning up ‘Labour’s debt and deficit disaster’ by making ‘tough choices’ that, of course, the public would wear in poorer services, increased taxation and downward pressure on welfare provisions. Now its the Liberals turn to face the inevitables of debt financing. 

 Regardless of the political spectrum the government’s problem is this: business and private lending has hit the ceiling because we’re all borrowed to the hilt. The Reserve Bank has admitted that monetary policy, with its record low interest rates, isn’t pulling its weight when it comes to increasing the debt-money supply. People are understandably worried about the future, costs of living seems to lift inexorably and since we dangle like a moribund puppet tethered to the global economy a tremor anywhere can give us a hell of a shake down here. For instance, they’re already worried about what sort of effect Trump’s tax reform (35%-15%) is going to have because, as Wesfarmers Chief Executive Richard Goyder said, ‘if people don’t think that capital is now global then they are kidding themselves.’

 Then comes along Morrison with a budget that will require a lifting of the debt ceiling and good and bad debt. Good debt is money borrowed for infrastructure projects that will increase productivity, employment and perhaps earn an income like more roads and rail. Bad debt is money borrowed for day-to-day running costs like health and welfare. The reasoning goes that the government can afford to borrow for productive projects but must get its daily bread from tax revenue.

 It’s nothing new. Taken from the McGraw-Hill Dictionary of Modern Economics under ‘Keynesian Economics’

 To prevent mass unemployment in the depression phase of the business cycle, he (Keynes) argued that the central government should compensate for the deficiency in aggregate demand by using deficit financing to stimulate spending and to create investments which would raise income to the full employment level.1

 Good and bad debt is simply a justification for treading the same tired track of government’s borrowing through routine economic slowdown. Business and private lending is low because we can’t afford to take on any more debt, especially mortgage debt that has been getting us out of trouble recently, and spending is low because bank repayments and rising costs are sucking the liquidity out of consumers’ pockets. That’s the depression phase and the cue for the government to step in.

 As per the textbook the money supply will be increased by the government borrowing for building things. It’ll create jobs and therefore incomes, people will spend more and Turnbull will increase his opportunities to be filmed wearing hard hats. But that money will have to be paid back with interest and in a few years when the building is done taxes will need to be raised to cover it, prices will have to go up, sucking liquidity out of consumers’ pocket and so on debt, taxes,  hard hats ad infinitum…

 To keep the banks out of the spotlight the political underlings are required to spin it in such a way that obscures what’s going on. This is where the household analogy does its work. Repeated and unchallenged in every relevant news story in the country we are told (in various ways) it is good sense for a family to take a loan to pay for a house but imprudent to be borrowing for everyday things - and of course sensible people agree. We are supposed to believe that the government is only being this kind of sensible. Except for one major problem. The government of a nation is NOT a bloody household.  Isn’t it obvious to everyone that national economics is not home economics? A nation’s money supply is the tool by which national economics is organised so if you want to organise it you need to have a supply of money. But government flatly refuses to organise for itself this facility and instead we get this corrosive process where those who are supposed to govern invent rhetoric to hide the simple truth that everything we want to do must first be approved by the financial sector at great expense to the people. Does Keynesian deficit spending to boost national aggregate demand during business cycle downturns sound anything like what goes through Jack Citizen’s head when he divvies up his fortnightly wad? The government knows they are not operating the money system along these lines and it is flatly dishonest to play on the ignorance of the public by leading people to believe they are. The bottom line is  that the balanced budget line is a critical defence of rule by money.

 We can look at it like this. If we would benefit from a certain level of health care there is no sensible reason why a shortage of money should prevent us from having it. If we don’t have the expertise or the equipment then it is understandable, but to say there is no money to fund it simply means we know the banks won’t lend to it so don’t even ask. Money is an order system like a train ticket. You wouldn’t accept from the station master that you can’t travel by rail because there aren’t any tickets, nor should we accept from banks, and the governments who defend their monopoly of credit, that we can’t have money to do something when we are physically capable of doing it and it is in the national interest.

 You’ll quite often hear economists say that there is no real expectation that the principle of the national debt, that is the $600 000 000 000, be repaid. Here is another departure from the household budget story. When ordinary people borrow something, they consider it decent behaviour to return that thing on the terms agreed to at the time of borrowing. This is not an active principle when it comes to accounting national economics.

 Why then do banks lend to governments when they know they won’t be repaid? Generally speaking, the banking system is an instrument for monetising the real wealth (energy and assets) of a community and funnelling it to a concentrated elite invested in finance. This process of monetisation is quite obvious. When banks lend privately and to business they assess income and asset base to determine how much money can be created and loaned. When it comes to government the amounts they will lend are calculated against GDP and tax revenue. Against the assessment of real wealth, a bank will then generate a money figure to be loaned, which is a numerical reflection of the value of the real wealth position of the borrower. Interest and fee conditions are attached to the newly created loan credit which makes up the bank’s profit.  It is vital to understand that the banking process has added no real wealth by this process but has created an opportunity for financiers to skim profits from the energy and assets of the community. As it is currently carried out the system of money creation by loan credit amounts to a constant drain of energy to an essentially unproductive element of society called the financial industry. The ‘product’ of banks, being numbers only, has no intrinsic value.

 It is this analysis that allowed Douglas to say in Dictatorship by Taxation that

 It does not require much assistance to see that just so long as the population will stand it — and Sir Josiah Stamp assures us that, with care, the population will stand much more of it — we shall go on paying an increased amount of taxes, the major portion of which will go to increase the power of banking institutions and their grip upon the population.2

 The process of credit creation described above combined with taxation allows the banks to reach through government into the pockets of ordinary people. Presently, in Australia, to the tune of $16 000 000 000 a year in interest payments made mostly to financiers abroad. As the national debt climbs so to must your tax bill and the profits and influence of lenders.

 If you doubt the funnelling effect of banking consider the ownership of Australia’s big four banks. In 2012 the Australia Institute’s study on the concentration of bank ownership found:

 Examination of the top 20 shareholders in the banks’ annual reports shows that, on average, over 53 per cent of each big bank is owned by shareholders that are among the top 20 shareholders in all the big banks. Moreover, ownership figures for the second-tier banks, the big three regionals - Bendigo and Adelaide Bank Limited, Suncorp-Metway Limited and Bank of Queensland Limited – show they are also owned by the same organisations that own the big four.3

 Combine these observations with the twenty to thirty billion dollar annual profits of the big banks and you shouldn’t need much convincing that the beneficiaries of Australia’s most profitable enterprises are remarkably few.

 As a starting point for improvement Arthur Brenton describes the proper relationship between the community, the producers and the banks when he wrote in his Social Credit in Summary

 15. The mortgagors (borrowers) are the producers; the mortgagees (lenders) are the whole community. The banks are the "solicitor" in the transaction—the community's agent—and their interest charges correspond to a "lawyer's fee."4

 In this conception, the producers (industry) borrow from community resources, both labour and capital, to generate a product for the benefit of the whole community. The community registers their approval of producer activity by buying the product of industry and so allowing it to continue production. The role of the bank is to ensure the producer of demanded goods and services has sufficient credit to carry out production and the community (comprising producers, consumers and even bankers) sufficient credit to buy it. Considering that the money banks lend is not wealth at all but, as we have seen, a representation created to allow for the convenient trade and transfer of wealth, it is proper that payment of bankers would take the form of flat rate charging for technical services.

 Beneath the angst and confusion about money is the conflation of the symbol with the object. Butler was exactly right when he said, ‘Just so long as sufficient people can be mesmerised into believing that, for example, a credit symbol is more important than a pound of butter, they are at the mercy of those who create and control the symbols.’ The reasoning behind the national budget only holds if we can’t see through this misconception. How else could a bookkeeping process prevent the building of a road, the construction of a house or any other programme of social betterment unless we have faith that the bookkeeping process is representative of the possibilities and limitations of building roads, houses and making better societies. In real terms Australia is an unfathomably wealthy nation, it is only the figures that report otherwise, but every utterance of leadership insists that the figures, not the substance, hold sway. It is illogical for us to expect politicians and bankers, those most heavily invested in the system, to show us the way through its dysfunctions. We must find our own way to a healthier state of things or as Michael Collins wrote ‘when we make ourselves fit we shall be free.’


 Brenton, A. 1928. Social Credit in Summary. Available from viewed 20.05.2017

 Douglas. C.H. 1936. Dictatorship by Taxation. Available from: Viewed 20.05.2017

 Greenwald, D. 1973. The McGraw-Hill Dictionary of Modern Economics, McGraw-Hill Inc., Sydney, Australia.

 Richardson, D. 2012. The Rise and Rise of the Big Banks: Concentration of Ownership. Available from:  Viewed 20.05.2017








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